Earnings call transcript: Better Home and Finance sees Q1 2025 revenue jump

Better Home and Finance Holding Company (market cap: $213.29M) reported significant growth in Q1 2025, with a 46% year-over-year increase in revenue, reaching 33 million dollars. The company’s funded loan volume rose by 31% to 868 million dollars. Despite these gains, the firm posted an adjusted EBITDA loss of 40.4 million dollars and a total GAAP net loss of approximately 50.6 million dollars. According to InvestingPro analysis, the stock appears overvalued at current levels, with a concerning Financial Health Score of 1.48 (WEAK). The company continues to focus on leveraging AI technology to improve operational efficiency and reduce costs.

Key Takeaways

• Revenue increased by 46% year-over-year to 33 million dollars.
• Funded loan volume grew by 31% to 868 million dollars.
• Adjusted EBITDA loss stood at 40.4 million dollars.
• The company launched Betsy AI, enhancing AI-driven loan processing.
• Better Home and Finance targets a 1% share of the 2.1 trillion dollar mortgage market.

Company Performance

Better Home and Finance demonstrated robust growth in Q1 2025, with a notable YTD price return of 57.62%, driven by its innovative use of AI technology and diversified loan offerings. The company’s strategic focus on direct-to-consumer and AI platforms has contributed to a significant increase in funded loan volumes. The firm maintains a healthy current ratio of 1.92, though it continues to face challenges with its net losses, emphasizing the need for ongoing cost management and efficiency improvements. For deeper insights into the company’s financial health and growth prospects, check out the comprehensive Pro Research Report available on InvestingPro, which covers 1,400+ top stocks with expert analysis and actionable intelligence.

Financial Highlights

• Revenue: 33 million dollars, up 46% year-over-year
• Funded loan volume: 868 million dollars, up 31% year-over-year
• Adjusted EBITDA loss: 40.4 million dollars
• GAAP net loss: 50.6 million dollars

Outlook & Guidance

Looking ahead, Better Home and Finance expects funded loan volumes to increase in Q2 2025. The company projects over 450 million dollars in Neo originations, representing 250% growth. The firm is committed to achieving profitability and reducing costs, with a target production cost of 1,500 dollars per loan. Better Home and Finance also plans to expand its B2B partnerships with banks and fintech companies.

Executive Commentary

CEO Vishal Garg emphasized the company’s focus on innovation, stating, "We are truly the first scaled-up AI platform built to empower consumers." He also highlighted the goal of reducing loan production costs, saying, "Our North Star is getting the total cost of production of a loan down to 1,500 dollars." CFO Kevin Ryan commented on the company’s financial strategy, noting, "We feel like on the margin, we’ve improved our pitch to them as a result of the balance sheet transaction."

Risks and Challenges

• Maintaining profitability amid ongoing net losses.
• Competition from traditional mortgage providers and fintech startups.
• Dependence on AI technology, which requires continuous innovation.
• Potential fluctuations in the mortgage market affecting loan volumes.
• Regulatory changes impacting the mortgage industry.

Q&A

During the earnings call, analysts inquired about the impact of AI on loan officer productivity and the flexibility of the Tinman AI platform. Executives also addressed the benefits of balance sheet restructuring and the company’s product diversification strategy. These discussions underscored Better Home and Finance’s commitment to leveraging technology to drive growth and efficiency.

Full transcript - Amplify Snack Brands Inc (BETR) Q1 2025:

Conference Operator: Hello, and welcome to the Better Home and Finance Holding Company First Quarter twenty twenty five Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. I would now like to turn the conference over to Tarek Afifi, Corporate Finance. You may begin.

Tarek Afifi, Corporate Finance, Better Home and Finance Holding Company: Welcome to Better Homeland Finance Holding Company’s first quarter earnings conference call. My name is Tarek Afifi, Corporate Finance at Better. Joining me on today’s call are Vishal Garg, Founder and Chief Executive Officer of Better and Kevin Ryan, Chief Financial Officer of Better. In addition to this conference call, please direct your attention to our first quarter earnings release, which is available on our Investor Relations website. Also available on our website is an investor presentation.

Certain statements we make today may constitute forward looking statements within the meaning of federal securities laws that are based on current expectations and assumptions. These expectations and assumptions are subject to risks, uncertainties and other factors as discussed further in our SEC filings that could cause our actual results to differ materially from our historical results. We assume no responsibility to update forward looking statements other than as required by law. During today’s discussion, management will discuss certain non GAAP financial measures, which we believe are relevant in assessing the company’s financial performance. These non GAAP financial measures should not be considered replacements for and should be read together with our GAAP results.

These non GAAP financial measures are reconciled to financial measures in today’s earnings release and investor presentation, both of which are available on the Investor Relations section of Better’s website and when filed in our quarterly report on Form 10 Q filed with the SEC. Amounts described as of and for the quarter ended 03/31/2025 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our quarterly report on the Form 10 Q with the SEC. More information as of and for the quarter ended 03/31/2025 will be upon filing our quarterly report on Form 10 Q with the SEC. I will now turn the call over to Vishal.

Vishal Garg, Founder and Chief Executive Officer, Better: Thank you, and welcome to our first quarter twenty twenty five earnings call. We appreciate everyone joining us today and for your continued support as we advance our mission to make homeownership better, faster, and easier for our customers by building a technology platform that revolutionizes the homeownership experience. I wanna set the tone for today’s discussion by reiterating that while the mortgage industry and housing markets are facing challenges, this dynamic create tremendous greenfield opportunity for us because we are truly the first scaled up AI platform built to empower consumers and now also empowering local mortgage brokers and banks with the technology to serve their customers. The mortgage industry is massive, estimated by the MBA to be 2,100,000,000,000.0 in total origination volume for the full year 2025, of which approximately 1,400,000,000,000.0 is purchased and approximately 700,000,000,000 is refund. So even just a 1% share of this massive TAM would result in 14,000,000,000 of volume for better, approximately three x from where we are today.

We continue to drive progress towards our mission in which every customer can seamlessly buy, sell, refinance, insure, and improve their home digitally, online, instantly, and towards executing on our key objectives, which are, one, to lean into growth and AI to drive increased volume and revenue. Two, ongoing efficiency improvements driven by continuous advancements in our technology and the implementation of AI through our entire operating model. And three, diversification of our distribution channels and corporate cost reductions. In the first quarter of twenty twenty five, on a year over year basis, we grew funded loan volume by 31% to 868,000,000 and revenue by 46% to $33,000,000 driven by funding more loans both through our DTC and Tinman AI platform channels. Last month, we were very pleased to announce the retirement of Better’s outstanding convertible debt and right sized the liability structure.

This transaction is expected to create approximately $200,000,000 of positive pretax equity value and create a path to long term value creation for our equity shareholders. Removing this debt overhang is a monumental achievement and key milestone to our capital structure, and Kevin will talk to this in more detail. In the meantime, we remain focused on driving towards profitability in the midterm by continuing to lean into Tinman technology and AI. With the Betsy AI loan assistant executing a 27,000 consumer interactions in March, our AI underwriting growing from over 40% of locked loans to 75% in the near future and increasing loan officer productivity in terms of loans per month to over three x the mortgage industry median. As we look forward to the second half twenty twenty five and beyond, our strategic priorities remain focused on what lies in our control.

Our first priority is to continue to thoughtfully propel growth. In the first quarter, year over year funded loan volume growth was driven by increases across all three of our main product categories with home equity products and refinance loans being the largest growth drivers. Specifically, HELOC and home equity loan volume increased 207%, refinance loan volume increased 64% and purchase loan volume increased 9%. This growth is attributable to the strategic investments we’ve made in technology, product innovation and distribution expansion, including the launch of Betsy voice based AI loan officer, deployment of our Tinman AI platform strategy with the addition of Neo powered by Better and efficient expansion of D2C. These strategic initiatives have positioned us to capitalize on market opportunities, enhance operational efficiency and drive sustainable growth.

Our second priority is to continue to reduce expenses and improve operational efficiency with the goal of reaching profitability in the medium term. While we expect loan origination expenses will increase as we lean into growth, as we further implement Betsy into the sales processing and underwriting workflows, we expect continued operating leverage with revenue growth outpacing expense growth. Using our Tinman AI platform, we have been able to automate time and labor intensive components of the mortgage process and reduce our cost to originate by over 40% of the industry average. We believe our continued investments in AI with our product and engineering roadmaps well on track will significantly drive down costs further, resulting in improved operating efficiency and superior customer experience. Lastly, our third priority is to continue diversifying our product and platform distribution channels.

We now have three ways of serving the customer using our technology: direct to consumer, Tinman AI as a platform, and Tinman AI as a software. In our D2C business, we serve the consumer directly on better.com. Better was founded on revolutionizing the consumer experience for the home finance process. And as such, our D2C business has always been at the forefront of pushing the envelope on what technology can do in the mortgage industry at its core. Within the DTC channel, contribution margin or per loan profitability is increasing as the operating cost to fund is decreasing due to implementation of AI in both the sales and operations workflows.

Next, we serve the consumer through our Tinman AI platform, powering loan officers across The United States locally for which we are seeing rapid early growth. For context, over $1,200,000,000,000 of mortgage volume in 2024 was originated by retail loan officers on antiquated technology and high operating costs. We are quickly disrupting traditional retail mortgage origination by onboarding loan officers and branches onto our Tinman AI platform and powering them to do more loans than they’ve ever done before, removing friction from their fulfillment process and expanding their capacity to help more customers. These loan officers keep the pricing they’ve been able to get historically based on the service level that they provide locally and within their communities and networks, all while compressing a staggering 80% of their back office costs using our platform. As we’ve discussed on recent earnings calls, Neo powered by Better, our first and now proven traditional retail mortgage originator leveraging the Tinman AI platform, is deeply benefiting from our AI technology and digital lead funnel, supercharging their loan officer teams who have demonstrated track records in customer service excellence within the communities they serve.

Further, Betsy, the first AI voice based loan assistant for The US mortgage industry, is being individually branded for each loan officer at Neo and rolled out through their entire Salesforce. We are making great early progress with Neo powered by Better, well ahead of our internal expectations and have high aspirations for the road ahead. Since beginning production in January 2025, we have onboarded approximately a 15 neo loan officers across 53 branches. Currently, neo loan officers are doing three loans a month and we have the goal of tripling plus their capacity to 10 loans a month, thereby also increasing their earnings three x and helping them serve even more families than they do currently. In January, we funded $2,000,000 of loans for four families.

In February, we funded $42,000,000 for a hundred and four families. And in March, we funded a hundred and 19,000,000 for 258 families. And this is during the slow season in mortgage origination. This is the first successful launch of taking an entire mortgage company off of their traditional mortgage industry software stack with Encompass and the other antiquated mortgage technology that Neo had been working with before. And within ninety days, getting them to exceed the loan volume they previously had while dramatically increasing their efficiency.

And as we have proven this out with Neo, with the entire mortgage industry watching, we have been inundated with other mortgage teams and companies wanting to move their business to the Tinman AI platform. We see massive opportunity in the road ahead to replicate the success of Neo powered by Better with other traditional mortgage originators. And lastly, we are serving the customer by powering banks that seek to license our Tinman AI software to become more efficient and customer centric. We have built a highly fine tuned platform for our own business and customers, and now there’s demand from others in the industry to license our software. This quarter, we are excited to sign an agreement with a bank partner to power their entire mortgage platform from a software perspective, from click to close with their sales and operations people in across the full range of products that they offer, including non q m and other niche products entirely on Kinmen.

As you all know, banks have traditionally had to offer mortgages, but the cost to originate these loans to their customer base has been well over $10,000 per funded loan, making bank origination of mortgages largely unprofitable. To be clear, banks want to originate mortgages, but they know they need to invest in technology to make it a profitable business in any environment. That is a huge opportunity for Better and Tinman. Notably, this will be the first implementation of Tinman as a direct competitor to the point of sale system plus CRM system plus pricing engine plus document engine plus loan origination software plus underwriting calculation engine setup that the vast majority of the mortgage industry has. Seven to eight systems all by different vendors with different pricing, with different middleware integrations, mostly not talking to each other, with stale data, with the ability to have only one person logged in at a time, creating the massive workload and massive cost that it takes to make a mortgage the traditional way.

We look forward to sharing more information about disrupting this entire software stack in the coming quarters ahead as we believe a very large addressable market exists within the mortgage ecosystem

Conference Operator: for a

Vishal Garg, Founder and Chief Executive Officer, Better: holistic one stop software solution powered by the industry’s leading AI engine, Tinman. To put the opportunity into context, over 5,000,000 mortgages were built on the Encompass platform in 2024. To the extent that we can achieve even 1% penetration of the Encompass customer base, we believe based on our current pricing that could drive an incremental 50,000 new loans and $75,000,000 of revenue to Better per year. And unlike other traditional mortgage software, our SaaS platform does not charge on a per seat or a per application basis. Rather, we are uniquely charging on a per funded loan basis where the revenue event for the mortgage company is directly tied to the technology cost, which is a fundamentally disruptive model to the traditional software players in the industry and enables the full adoption of AI.

Because unlike those other players, we are paid on a per successful transaction basis, not by filling seats or filling the application funnel. To sum it all up, while our d to c business has always been at the forefront of pushing the envelope of what technology can do in the mortgage industry at its core, We have started making great advancements in diversifying our product and platform distribution channels, notably through the Tinman AI platform, both empowering local loan officers and mortgage brokers and empowering banks with our software. Looking ahead to the second half of twenty twenty five and beyond, some opportunity ahead of us has never been more exciting. We remain focused on enhancing our go to market with growth being our North Star alongside continued expense management and channel diversification. We will continue to invest in building the leading AI platform in the mortgage industry, Tinman, to improve the customer experience and further drive down labor cost, making our platform more efficient and scalable, ultimately driving the business to profitability.

Furthermore, we are substantially broadening the use of Tinman through diversification on both Tinman AI as a platform for other mortgage originators and Tinman AI as a software service to solve for the mortgage industry’s broken tech stack. With that, let me now turn it over to Kevin Ryan, our Chief Financial Officer, who will discuss the quarterly performance and our financial strategy. Kevin?

Kevin Ryan, Chief Financial Officer, Better: Thank you, Vishal. As we’ve discussed on prior calls, even through a continued challenging market environment and now heightened macro volatility, we continue to make great progress towards our goals of increased volume and revenue balance with ongoing expense management and improved efficiency. In the first quarter of twenty twenty five on a year over year basis, we grew funded loan volume by 31% to $868,000,000 and revenue by 46% to $33,000,000 driven by funding more loans built through our DTC channel and Tinman AI platform. We had an adjusted EBITDA loss of $40,400,000 and total GAAP net loss of approximately $50,600,000 By channel, first quarter funded loan volume was 71% generated through direct to consumer and 29% generated through Tinman AI platform along with B2B. By product, funded loan volume was 67% purchase, eighteen percent second lien or home equity and 15% refinance.

On a sequential quarter over quarter basis versus Q4 twenty twenty four, Q1 funded loan volume was down approximately 7% as Q1 is always seasonally the slowest quarter in the DTC business and this compared quite favorably to our prior guidance of down 10% to 15%. We are pleased that despite the sequential quarter over quarter decline in volume, revenue was up approximately 30%. Revenue grew in the quarter despite the expected decline in volume due to volume from Neo coming on board with higher gain on sale margins, our continued push towards increased pricing and a tailwind from the loan loss reserve. Turning to expenses during the quarter, when excluding one time costs related to clean up items from the SPAC transaction, total expenses decreased approximately 11% in Q1 compared with Q4 of twenty twenty four and we reduced the adjusted EBITDA loss on a month over month basis during the quarter. Loan origination expenses were down in Q1 on a sequential basis versus Q4 ’twenty four.

While these loan volume related expenses will increase as we further lean into growth, operating leverage will rise as revenue growth outpaces expense growth. Turning to our balance sheet and capital structure. Last month we announced the retirement of approximately $530,000,000 of convertible notes, creating approximately $200,000,000 of positive pretax equity value to continue expanding our AI mortgage platform. We are very pleased to reduce the debt overhang and improve our balance sheet positioning and strategic optionality. With the completion of the debt restructuring, our priorities squarely remain growth and profitability.

We continue building out our Tinman AI platform and Tinman software channels, lean into productivity driven savings through AI deployment across the mortgage business and drive cost down further in our corporate functions. We are excited about using AI to drive the business towards growth and profitability similar to the advances we experienced in 2016 to 2021 when we grew originations by over a hundred times. Turning now to our outlook. We remain focused on managing towards profitability in the midterm and we expect to drive growth through efficiency from Tinman AI, distribution channel diversification and optimized marketing while balancing these growth expenses with further corporate cost reductions. For the second quarter of twenty twenty five, we expect funded loan volume to be up compared to the first quarter of twenty twenty five driven by efficiencies in our Tinman AI platform.

We are particularly excited that the Tinman AI platform loan volume is pacing well ahead of our internal plan in March and April despite the heightened macro volatility and we expect over $450,000,000 of neo originations in Q2 which is growth of over 250% versus Q1. Additionally, for the second quarter, we expect core expenses including compensation and benefits to be down relative to the first quarter. For the full year of 2025, we expect funded loan volume growth to increase year over year driven by tailwinds from the growth initiatives including Neo powered by Better offset by continued macro pressure and the loss of the Ally business, a roughly $1,000,000,000 headwind. We expect growth to come particularly in the second and third quarter of the year at which point we expect Neo Power by Better to be more fully ramped and to benefit from improved seasonal tailwinds. We also expect further improvements to our adjusted EBITDA losses in 2025 as compared to 2024 due to a combination of efficiency gains and continued corporate cost reductions.

Lastly, we continue to undergo efforts to exit our non core UK assets. We’ll focus on growing Birmingham Bank. We expect to more than double UK bank originations again in 2025 as we deploy AI with the goal of building the leading AI driven specialist mortgage bank in The United Kingdom. We expect the exiting of three smaller non core UK businesses to start being a benefit to our adjusted EBITDA losses in the second half of twenty twenty five as a result of their disposition. With that, I’ll now turn it back to the operator for Q and A.

Conference Operator: Thank you. Your first question comes from Kartik Mehta with Northcoast Research.

Kartik Mehta, Analyst, Northcoast Research: Vishal, you talked about the neo platform and obviously how much success you’re having with it. As you’ve looked early stages, I know you talked about ninety days, but what do you think is a fair number of time before the loan officer really can happen to feel the impact of that model? And how do you expect that to trend over the next twelve months?

Vishal Garg, Founder and Chief Executive Officer, Better: I I think they start to see the impact within thirty days. And that starts with taking out a huge chunk of the sales related tasks that the the loan officer has to do, other than speaking to the consumer. So they immediately start getting back hours of their day that they were spending either putting data into the system, getting data out of the system, following up from the system, following up with processors, underwriters on where loan files are at, where customer files are at. All of that is done automatically by the system. So they immediately start getting time back.

Then from there, they start getting productivity back because the customers that they’ve locked, they’re not having to chase them up for the documents. The the engine is doing it directly. If there’s some problem with the document, the engine is doing it directly for them. And then they encounter the AI underwriter where if a loan file needs to get restructured, and I’m really excited about the AI underwriter because it captures the logic across all 35 of our investors’ guidelines. Right?

We’re talking almost like 40,000 pages of guidelines and pricing that’s updated three times a day. It’s capturing all of that. And it basically gives, like, the loan officer the means of addressing the customer’s question. Hey. How do I get a lower rate?

Hey. How can I qualify for a bigger mortgage? Hey. How like, you know, what do I need to do to get this loan approved if it’s, know, this new thing came up? Or, you know, I wanna also buy a car.

Or, you know, my dad doesn’t wanna cosign anymore, but my mom does. All of that, it just totally does it instantly. Something that would have taken a human underwriter three to ten hours to resolve, it’s getting back answers in three to five seconds. So people are seeing it immediately. And that’s why we’re seeing the traffic come in from these other loan officers.

We already have, you know, on top of the neo 2 and a half billion we’re talking about, we already have inbound on another 50,000,000,000 of loan officers who are funding loans today, who are excited and interested in the platform. Now all 50,000,000,000 is not gonna pan out. People are gonna have things in their cycle. People are gonna wanna figure it out. But we have created a mechanism by which if you’re a retail mortgage loan officer or retail mortgage team or retail mortgage company, you can get full transparency, you can get total control, and you have to share a much smaller percentage of your profits with our platform and get massive productivity increases.

So what we’re promising the retail loan officer is we’re gonna help you make three times more money and cut your cost in half. And, that’s a pretty compelling value proposition.

Kartik Mehta, Analyst, Northcoast Research: Yeah. So thank you for that. And just as a follow-up, maybe how many more loan officers in 2025 would you like to onboard? I didn’t know if there’s a capacity or if there’s a way that you wanted to kinda scale this in terms of adding to the platform.

Vishal Garg, Founder and Chief Executive Officer, Better: Yeah. So to be cons to be honest, like, in 2021, we had 5,000 loan officers. Here we are onboarding a 50 of them on the retail channel. Right? So the the the the the other thing that the platform provides is effectively infinite capacity to any loan officer team.

And so I think we would like to grow. I think we’d like to triple or quadruple the NEO channel. We’re already going to double it this coming quarter as Kevin mentioned, in terms of production. So I think there’s a lot of capacity ahead.

Kartik Mehta, Analyst, Northcoast Research: Thank you very much. I appreciate it.

Conference Operator: Question comes from Brendan McCarthy with Sidoti. Your line is open.

Brendan McCarthy, Analyst, Sidoti: Great. Good morning, everyone. Thanks for taking my questions here. Just wanted to start off looking at the unit economics. Just curious as to how the unit economics at the loan level trended year over year.

And I guess, really aiming to get an idea of, you know, how do you quantify the AI functionality and and really you know, you mentioned operating leverage is is kinda positioned to improve looking forward. You know, are you able to quantify maybe how much you expect that to improve looking ahead?

Vishal Garg, Founder and Chief Executive Officer, Better: Yeah. Kevin, do you want to take that question and I can fill in?

Kevin Ryan, Chief Financial Officer, Better: Yeah. Let me start. So I think, Brendan, there’s a couple of things here. So the unit economics have improved. If I just take Q1, February was better than January, March was materially better than February.

And when you look at our actually aggregate losses, March was came in about $7,000,000 so materially lower. And the mortgage company essentially was breakeven in March. And so the unit economics is a direct result of the AI improvements are coming fast and furious. Now there’s always a market cyclicality to it as it relates to purchase season, purchase season kind of deferred a little bit here given some of the macro. So it’s not going to be linear, but to date it’s been pretty linear to date, but I wouldn’t assume that’s going to be true month over month over month.

Where are you going to see the savings? And so I’ll kind of maybe just guide you through the income statement. So the majority of the savings you’re going to see through the continued technology improvements are going to be in the compensation and benefits line. That number is going to go up as we onboard the loan officer that Michelle just talked about, right? As we add LOs, comp and BEN is going to go up, but it’s going to go up slower than revenue and it’s continued to improve.

I think the comp and BEN as a percentage of revenue, it’s getting materially better and will continue to get better and that’s always been one of our challenges. The other place you’ll see it is in loan origination expense. Will that will continue to come down. So basically think of that as non comp expenses on a per loan basis. We’re safely below $1,000 alone and going even lower on that line item.

And that is really as a direct result of being able to deprecate vendors, renegotiate vendors, drive better deals, and use our technology to really lower the expense, the non comp expense cost of manufacturing alone. So those are the principal areas you will see it.

Brendan McCarthy, Analyst, Sidoti: Great, Kevin. I

Vishal Garg, Founder and Chief Executive Officer, Better: appreciate your insight. Yeah. I think the North Star is getting the total cost of production of a loan down to $1,500 a loan. You know, $500 of sales labor, $500 of ops labor, and $500 of, you know, credit bureau, income verification, and all of those other sort of external vendor costs. And we’re driving hard towards that.

And if we are able to do that, we’re going to be six times cheaper than the industry’s cost to manufacture. Retail mortgage originator today you know, of, sale expenses spending $7,500 alone, to, you know, basically, get a loan all the way funded through the books. So, we think that there’s certainly a lot more to gains coming out of the AI. We’re starting to actually see it in the numbers, with as Kevin mentioned the mortgage company becoming profitable, this quarter which was, which is it hasn’t been in many quarters, and, we’re gonna now be able to, like, continue to grow. The the important thing is is that, you know, as you know, mortgage is a scale business.

And so, what we did this quarter with the addition of two additional methods of addressing of reaching the market, one, surely on a software basis and the second on a platform basis is going to drive substantially more volume through the entire funnel. That’s going to enable us to get a better pricing across our vendor contracts, get better execution on hiring and deploying labor and really get the benefits of scale that, you know, plus the AI can can bring.

Brendan McCarthy, Analyst, Sidoti: That makes sense. I really appreciate the insight, looking ahead. And then wanted to talk on the balance sheet. First of all, on the convertible retirement. I think that’s a big piece of the story.

But just curious as to maybe longer term, what kind of leverage level makes sense for the business? Kind of how do you think about the balance sheet at this point versus where you’d like to be?

Kevin Ryan, Chief Financial Officer, Better: Sure. So so I’ll I’ll start. Michelle may wanna supplement. I’ll make a few comments as you think about our balance sheet and leverage. The first is, to date, we have always sold servicing released.

So we we run a very capital light business model. We don’t really you know, we’re on a billion dollar balance sheet, but half of that will be loans held for sale, and those loans are recycling quite quickly. Right? Particularly post the SoftBank transaction. Because I think as we talked about in the eight k when we did the deal, we didn’t use much cash at all to actually do that deal, but we did sell loans held for sale that were unencumbered that we chose not to pledge the warehouse lines in order to fund that transaction.

So from a leverage perspective, we don’t really think about it as debt to equity per se, like where a lot of other companies may because they run a big servicing asset on the balance sheet that they presumably for most lever through a financing facility against the MSR. But what I will say, the $155,000,000 of new debt we’ve put on, it does not mature to the end of twenty twenty eight. It’s fully picked. Until we’re profitable, we’ve informed our partner, our lender that we will be picking the interest. And so that will accrue, but we will not cash pay it.

And so we’re we’re quite comfortable with a hundred and 55,000,000 of debt due at the end of twenty twenty eight. And I think the combination of market improvement and all the self help we’re doing, and the work we’re doing around technology, we think refinancing that, you know, three years from now, should be, you know, well within our purview. So we we feel quite comfortable with our current leverage.

Brendan McCarthy, Analyst, Sidoti: Great. Thanks for the insight there, Kevin. And one more question from me. Yeah. No.

This is constantly a point of growth here is is the b two b partnerships. What other opportunities are you seeing for b two b partnerships? And and maybe you could talk about the pipeline there.

Kevin Ryan, Chief Financial Officer, Better: You wanna start that one, Rochelle?

Vishal Garg, Founder and Chief Executive Officer, Better: Yeah. So I think there’s, we’ve so I’ll give you some context on the bank that we signed up, with respect to the, you know, I think there’s basically, two flavors of b two b partnerships going forward. First is a software only partnership. There, we what we what we saw with, you know, Ally leaving the business and all the banks sort of that we’ve pitched for Ally like deals over the past couple of years is that a lot of the systems and the processes that these banks have, I think they’re all in downsizing mode for their mortgage business. And quite frankly, they’re not keen to outsource the bulk of the front office and back office like a full package like what Al was doing to us.

So now with the ability for these banks to utilize our software, and basically then also scale up and down on the services. So if they need a marginal processor or marginal underwriter they can use us but if they don’t they don’t have to. They can just use the software and get the efficiencies out of the software for their loan officers and their processors and underwriters. We think that’s a much better go to market strategy and we think we’re going to be able to scale that up pretty rapidly. We have a whole host of fintechs and banks waiting as we deploy this one bank across and and get it across the finish line.

To give you some context, you know, for a typical bank to deploy the traditional mortgage industry stack, we’re talking, you know, a million to $5,000,000 in integration implementation costs and nine months. For this one bank client, we had them up and running on conforming loans in three days, and then they asked us to get up and running across their entire product set and also do wholesale for them. And we’ve got them up and running in sixty days. Zero implementation costs, zero third party vendor fees, nothing. So all, you know, per funded loan basis.

So, you know, with this one bank, just on the volume they’re transitioning to the platform from what they did last year, we’re going to make 4,000,000 plus in revenue. And we think now with adding wholesale capabilities, we might be at, like, you know, 10,000,000 to 12,000,000 in revenue over the next, eighteen months on an annualized basis with this one bank alone. So and there there’s they’re small to medium sized banks. So the pipeline is looking really good on that. The second part of the b to b pipeline that we have discovered, really does work for us is other fintechs who want to get into the mortgage business.

Wealth management fintechs, lending platforms, personal loan platforms and we’re seeing a lot of interest from those platforms to start to diversify into home equity, and eventually in a mortgage and be prepared to turn their customers into mortgage customers. And these platforms have done a really good job aggregating millions and millions of users over the past couple of years selling, you know, everything from buy now pay later, personal installment loans. And, you know, we make it really easy for them to get in the mortgage business without having to hire LOs and underwriters and processors and so on and so forth. So we hope to share with you positive feedback and details and, you know, sign some big deals over the next nine months, in this year on, with many of these large fintech platforms. So I hope that covers, like, the two different types of b two b that we’re going to see going forward.

Brendan McCarthy, Analyst, Sidoti: Absolutely. Very helpful. Thanks, Michelle. That’s all for me.

Conference Operator: The next question comes from Rayna Kumar with Oppenheimer. Your line is open.

Jake Koinman, Analyst, Oppenheimer: Hey, good morning. This is Jake Koinman on for Reina. Thank you for taking our question and congrats on onboarding your first bank partner as part of the Tinman AI as a software opportunity.

Kartik Mehta, Analyst, Northcoast Research: So I was

Jake Koinman, Analyst, Oppenheimer: just hoping you could expand on how this relationship works in terms of the economics and operational workflow. And what does the go to market look like to capture additional bank partners? Thank you.

Vishal Garg, Founder and Chief Executive Officer, Better: Sure. So, the way that it works is that, we take all of their existing software, and it goes away, and they get one platform. We load up the pricing that they want and give them self serve pricing control. We load up the underwriting criteria they want, and they can have that attached to the pricing. So it’s the only eligibility plus pricing platform in the industry.

So they can add an additional underwriting criteria and charge up or down for it on an overlay basis all in one flow, and it automatically triggers what needs to be tasked out, both to the consumer and the processor and underwriter. It does it all automatically. So it’s really easy to learn once they kind of get the the hang of it, and we basically deploy an account manager and a product manager to help them do that. On the other side, we’ve created a retail origination module for them for their bank, branches. We’ve created a wholesale origination module for them and a, you know, direct to consumer module for them for their website.

And so they deploy that and they take in the applications, basically mimicking the same workflow that they have today, but with an AI assistant handling everything. So they basically can now be on twenty fourseven, three sixty five days a year for their customers and their LOs can become three times more productive and start reaching the productivity that better LOs have traditionally had in the industry. And then from there their underwriters are able to just basically become exceptions managers and basically all of those folks get trained by our team. We have a SWAT team that goes there, gets deployed And then from there, they’re up and running. The math on that is, you know, per loan for a funded loan, we’re earning about $1,500 per funded loan in software fees and platform fees.

And basically, they don’t have to deal with eight different vendors. They don’t have to deal with multiple systems integrators. They don’t have to deal with any of that stuff. And so for them, that’s very, very compelling. It’s not just compelling on a cost basis.

It’s compelling because we’re increasing the throughput of their people by two to three x, which substantially takes their cost down in terms of cost to originate and gets it more like better cost to originate plus brings them scale because then they’re not delimited by each marginal for the next marginal loan they want to do, they have to hire a new loan officer and a new processor and a new underwriter and having to manage all of that. Anytime they have a staffing shortage, they can then just turn on us, kind of like, you know, what AWS did. We’re doing for mortgages. Basically, you can turn on or turn down instantly capacity, and, it just accommodates it.

Jake Koinman, Analyst, Oppenheimer: Great. Thank you. Appreciate the details.

Conference Operator: Your next question comes from Eric Hagen with BTIG. Your line is open.

Eric Hagen, Analyst, BTIG: Hey, thanks. Good morning, guys. Back onto the balance sheet, maybe, I mean, how does the restructuring give you better negotiating terms with lenders and other counterparties? You guys talked about the bank partnerships. I mean, how does the restructuring itself play a part maybe in your ability to like source and maintain those relationships?

And again, like the restructuring itself, does that make you more competitive with some of the other entities who may be looking at those similar partnerships?

Kevin Ryan, Chief Financial Officer, Better: Yes, sure. So Eric, it’s Kevin. I’ll start and then Vishal may want to supplement. It’s certainly helpful. I think as we kind of we disclose, we’re going to create about $200,000,000 of equity creation as part of the deal.

I think there were people who definitely looked at us and said, do you have a relatively high debt load? Certainly for a company that’s kind of at the low point of the cycle, hopefully cycle improves here, and all the AI improvements will kind of drive us through the cycle irrespective of what the cycle does. But I think we’ve definitely fixed the balance sheet and that we’ve taken equity up, debt down as a course of this deal. So when people do their high level diligence on us as a partner, I think they’re really looking at us for the technology, what we can provide, all the things Vishal just went through, right? That is what they’re really looking for, but they certainly want to make sure they have a strong counterparty as well that they’re to work with for years and years and years to come.

And so we feel like on the margin, we’ve improved our pitch to them as a result of the balance sheet transaction. But we did the balance sheet transaction because it’s just the right thing to do for shareholders. And it was the right kind of ROI on the use of the cash we used to actually get the deal done.

Eric Hagen, Analyst, BTIG: Great color there. Appreciate that. I mean, we hear constantly about the range of borrower profiles, the need for loan officers to effectively tailor a loan to the borrower’s profile. Mean, do you guys work with the software to address these different profiles? How do you benchmark that flexibility to, you know, again address the different loan profiles?

Or is it really more effective to instead think of the better platform as really just being the cheapest and most efficient platform for the borrower whose profile is, you know, down the fairway, so to speak. And the niche for the software isn’t really trying to be super, you know, tailored. You know, how should we kinda think about, like, where you guys plug in? Thanks.

Vishal Garg, Founder and Chief Executive Officer, Better: I I I think that’s a really great question. So for the first seven years of our life, Better was great, for straight down the Fairway customers. And we just crushed it in terms of cost and efficiency on conforming jumbo, IFICO, medium TI, ADLTV type loans. And that fueled our growth. And I would say really onboarding the retail loan officers, we’ve had to build out the functionality for every loan type in Tinman in the past hundred and twenty days.

So three plus borrowers. Who even knew that was a thing? But apparently, Bank of Mom and Dad is really big in retail. Right? And you need to have three plus borrowers.

So we had to build that into our system. And now we have infinite borrowers, It can qualify. You can have 12 borrowers on our own file. We had to build all the custody products. We had to build the construction loan product.

We had to build all these additional products all into the system And now the system crushes all of those loan products. For this bank, we have to onboard bank non QM, bank statement, Docklight. System now crushes it. And more importantly, the AI underwriting automatically is matching the consumer to the full product set and exposing the full product set. The loan officer doesn’t have to do any work to remember any of this stuff.

It doesn’t have to go from the loan officer from a conventional product, and then go through the funnel, go through underwriting, and then come get kicked out, and then get matched to a different product and so on and so forth. It’s like all happening instantly. And so I think, you know, one of the things that Tinman is going to now be known for is not just being super cost efficient, but actually capturing the full scope of products that are available on the platform, which, by the way, is helping d to c dramatically improve its unit economics because all these people that we were previously turning away in d to c that we didn’t have a product for, we now suddenly have a product for. So this is a you know, the growth of, Tinman AI and the breadth of the product offering is happen is is improving conversion across, all of our channels.

Kevin Ryan, Chief Financial Officer, Better: Yeah. I mean, Eric, the addition Vishal just said it, but the addition of products is one of the biggest stories for us over the last three to six months. Is there, you know, through Tinman AI, the onboarding of Neo, it’s been a it’s been a game changer as it relates to rolling out products.

Eric Hagen, Analyst, BTIG: Right. Great color from you guys this morning. Appreciate you.

Conference Operator: The next question comes from Bose George with KBW. Your line is open.

Bose George, Analyst, KBW: Hey guys, good morning. Actually that was very interesting on your comments about the way TIMMAN could disintermediate some of the LOS systems. Are the companies that you’re speaking to like the bank you noted generally on a system like Encompass and then they’re looking at you guys as a lower cost, higher efficiency alternative? Or is it kind of a, you know, de novo? Like, yeah.

Can you just characterize the people you’re talking to?

Vishal Garg, Founder and Chief Executive Officer, Better: The people we’re talking to are on Encompass or SimpleNexus. And the the bank that has that we’ve onboarded was on encompass and Neo was on compass. And, fundamentally, I think the, you know, the the efficiency gain from moving from those two systems plus all the vendors ecosystem around it, to, to our platform is, is pretty dramatic. And, you know, these these companies obviously have huge sales forces, long contract cycles. But I think what’s been really fortuitous for us is this is all happening now at the same time as everyone is reevaluating all of their technology to determine whether it can work with the AI agents and LLMs.

And, basically, the bulk of these technologies that exist in mortgage land, they can’t because you have seven or eight systems. You know, if you talk to OpenAI, they’ll tell you the maximum number of function calls that the LLM can do, at the same time is two to three function calls. Right? So now how are you gonna do to you know, if you’ve got a delimiter on two to three function calls right now, how are you gonna do it across eight systems without the type of latency that we’re talking about? We’re minutes of latency, and nobody wants that.

So you can’t deploy an AI agent on any of these old broken systems. So I think it’s sort of like a seminal 1995 to 1999 moment where, you know, suddenly the Internet’s a thing. Well, now AI is a thing, and you none of these systems are AI equipped. That’s why you haven’t I mean, we’ve rolled out Betsy six months ago, and you haven’t seen anything out of the industry other than an appointment scheduling bot for loan officers. It’s like a interface on top of, like, you can book me.

So I think, fundamentally, you were were were our lead is, a generational lead here. And, and, you know, I have been super surprised by the industry response, particularly from very large mortgage companies reaching out to us and saying, wow. This worked. I assume you get it. It worked for them.

You’ll get it to work for us. You know, come out and

Bose George, Analyst, KBW: see us.

Vishal Garg, Founder and Chief Executive Officer, Better: And and and so we’re we’re gonna scale into this.

Bose George, Analyst, KBW: Okay. Great. That’s interest interesting. Thanks. And then, actually, companies that you’re speaking to noted any concerns about, you know, essentially buying technology from a competitor.

And, you to the extent this thing grows meaningfully, is there any sort of alternatives like maybe separate this out? Or is that too early to think about things like that?

Vishal Garg, Founder and Chief Executive Officer, Better: I think it’s too early to think about that. I I I think the the the companies that we’re talking to, we’re not in retail. We’re not you know, they’re they don’t view better.com as a competitor. And I’ve been transparent with them. Better.com b two c might become, you know, 25% of our business or even 10% of our business over time.

And I you know, I think I think, yes, there’s that. But then there’s also the you know, when you’re facing a potential extinction event, you’re less worried about, like, buying a tool that helps you get past that extinction event from someone who could or would have maybe be a competitor.

Bose George, Analyst, KBW: Yep. Okay. Yep. Makes sense. Thank you.

Conference Operator: This concludes the question and answer session. I’ll turn the call to Vishal Garg for closing remarks.

Vishal Garg, Founder and Chief Executive Officer, Better: Thank you all for continuing to support us as we build America’s leading AI mortgage platform. And in doing so help consumers get a mortgage, get a better rate, have a better process, which lets them have a better house and a better life. While the past five years have been challenging for us given the state of the market, we’re now playing offense hard again. We’re looking forward to executing on our continued efficient growth and to share more positive news with you in the quarters ahead. Thank you.

Conference Operator: This concludes today’s conference call. Thank you for joining. You may now disconnect.

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